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Agricultural Marketing Resource Center

Aquaculture

By Dan Burden, AgMRC, Iowa State University, djburden@iastate.edu and C. Greg Lutz, professor, Louisiana State University Agricultural Center, glutz@agcenter.lsu.edu.

Revised February 2015.

Aquaculture:


Introduction


For thousands of years, people have harvested the bounties of the sea and also cultivated its “crops." As global demand for fish increases, these farm-raised stocks will become more important to the food supply. In the United States
consumers spent an estimated $86.5 billion for fishery products. In producing and marketing these items, the commercial-fishing industry contributed $43.6 billion in value added to the U.S. GNP; that said, the U.S. imported 5.4-billion pounds (2.5-million metric tons) product weight, valued at $18-billion (NOAA Statistical Highlights 2013).  

The United Nations reports that around 40 percent of the world's total fish supply comes from aquaculture. World aquaculture remains a fast-growing food-producing sector, yielding nearly 60 million metric tons with an estimated value of over $119.4 billion in 2010, or an average annual growth rate of 8.8 percent in the last three decades. About 600 aquatic species are raised in captivity in about 190 countries by farming systems of varying input intensities and technological sophistication (FAO 2012).

Aquaculture is a catch-all term that encompasses the subsistence, medium-scale or industrial production of commercially important finfish (such as catfish, trout, salmon, tilapia, and various marine species); reptiles (such as turtles, crocodiles and alligators); mollusks (oysters, mussels and clams) and crustaceans (lobsters, shrimp, crabs and crawfish). A distinction can be made between “aquaculture” and “mariculture,” or marine aquaculture.

Aquaculture systems tend to be pond, confinement or recirculating systems, and mariculture systems tend to be pen-type enclosures, tended near-shore sea beds or off-bottom containment systems within the sea. 

 

Economics

In 2010, the top ten producing countries accounted for 87.6 percent by volume and 81.9 percent by value of the world's farmed food fish. Asia accounted for 89 percent of world aquaculture production

by volume, with China remaining, by far, the largest aquaculture producing country. In 2010, the FAO estimated that China accounted for 60 percent of global aquaculture production (FAO 2012). As population demographics and economic forces combine to increase the demand for seafood in the Asia-Pacific region over the coming decade, the dynamics of import-export competition among aquaculture producing countries may shift considerably.

What differentiates it from current production? In the coming decades many developing countries will feel pressure to shift more resources toward aquaculture production, due to its environmental and economic efficiencies. Aquaculture species such as tilapia, catfish and crawfish are far more efficient at converting traditional feedstuffs into edible protein than are traditional livestock and poultry species. As a result, many forms of aquaculture production also result in reduced environmental impacts when compared to traditional animal husbandry (Lutz 2001). In most developing countries, if one used the same amount of land (but in the form of a pond) and all the inputs required to produce a 1,000-pound cow, they could produce roughly 4,000 pounds of tilapia and perhaps even more under some conditions.

What are the current trends? Within the United States, producers will have to focus on targeting local and regional high-end markets and adding value in order to side-step competition from lower-cost commodity-scale imports. Considering that much of the wholesale cost of seafood products in the United States involves cold storage, transportation and warehousing, opportunities will emerge for producers who can side-step some of these costs.

Aquaculture production will increasingly focus on price competition, with certain regions and countries becoming more specialized in certain species. Shrimp and tilapia production can be expected to continue increasing, but only in those regions with the most suitable climate and natural resources, and only where governments are willing to invest in infrastructure and regulatory frameworks that foster industry development. Similar trends will occur with many species, such as salmon and even catfish. One limiting factor for many industrial operations will be access to inputs such as high-quality manufactured feeds.

What are the current issues? The U.S. Food and Drug Administration initiated import controls for certain species of farmed seafood from China in recent years. The action was in response to numerous cases of contamination. The five species listed were catfish, shrimp, basa (a species similar to catfish), dace (a species similar to carp) and eel. Quality control in imported products such as these can be expected to continue to improve in the coming years.

Private sector aquaculture is in competition with global imports of other aquaculture products, which suggests that greater transparency in supply chains and by retailers with respect to origin-of-product, or local or regional production, could go a long way to aid U.S. producers in securing market share. However, significant increases in feed costs over the past decade have impacted competing aquaculture producers in all parts of the globe. These increased costs have caused many U.S. producers to leave the business as profit margins have eroded or completely disappeared (NASS 2013).

As feed costs increase, the relative importance of higher labor costs and regulatory constraints becomes more apparent when comparing aquaculture production budgets in North America and Europe to those in developing countries.

During the last two decades, the value of U.S. aquaculture production rose to nearly $1.1 billion. Results of the 2007 Census of Agriculture (NASS 2009) indicated that sales of fish, shellfish and related products grew by 11.7 percent over the previous five years. Since that time, however, production has declined in some sectors.

What is the industry outlook? Any aquaculture venture must consider the dynamic nature of the overall seafood industry, whether local, regional or international. Seafood is the “most international” of all proteins, and this trade has been valued at more than twice the combined trade of all other meat and poultry (FAO 2004). Seafood trade occurs in a highly volatile global marketplace that often lacks transparency. Aquaculture industries must compete not only with each other but with wild-caught products as well.

World-wide demand has been projected to increase from 133 million metric ton (MT) in 1999/2000 to around 183 million MT by 2015 (Delgado et al. 2003), although the actual figure may be somewhat lower at that point in time. Aquaculture is expected to provide products for the majority of this increased demand, with traditional wild-catch fisheries providing the remainder. Product demand is also expected to change over time, and product diversity in the form of new species (tilapia) and product lines (coatings, flavors, sauces, quick-to-prepare meal offerings) will play important roles in established and emerging markets. Almost all innovative new product offerings are currently based on the top four aquaculture species, and much of the demand is driven by retail outlets that demand supply stability, consistency and product standardization (NFI 2011). In various parts of the globe, however, aquaculture entrepreneurs may find increasing opportunities by focusing on alternative species, siting and planning their operations for targeted markets of defined scope, and avoiding competition with major commodity products. Back to top.


Marketing

How is your product being marketed? Successful small- to medium-sized companies create business plans and stick with them. Big businesses even go a step further by developing formal “pipelines” within their short-term business plans where potential clients are assigned staff to service their needs and develop sales. Progress is routinely recorded and analyzed with respect to the underlying reasons for wins and losses, progress of opportunities in relation to the sales process, note the most successful staff working with the potential client and adjust the team accordingly, and if sales are underway, look at the sales customer service situation. They may even set up and manage alliances with third-party companies to leverage one another’s contacts and expertise.

Successful businesses of all sizes have universal procedures for ensuring success, even in tough economic times. By researching sound business-development practices, developing a business and sales plan, and networking, any size operation will benefit. Assume from the start that as much time and effort will be spent on marketing as on production within any successful aquaculture venture.

Are you targeting specific distribution, retail or consumer groups? To get an order for your aquaculture product, you need to do a few things. First, identify companies (restaurants, distributors, institutional food services) and other potential outlets (farmers' markets, direct-to-consumer sales). MarketMaker found on the AgMRC homepage will help a great deal, making this an easy exercise. Once you have your businesses and outlets targeted, you need to identify the name of the key person in that organization to whom you hope to sell the product. This person is a decision-maker. Don’t settle for anyone else. If it is a restaurant, it may be the chef and not the owner, or both may be important in your sales call.

Product differentiation. What makes your product unique? This could be local production, production environment (animal welfare), culinary quality of product or suitability to special presentations.

Once customers have been identified and engaged, a critical aspect in aquaculture marketing involves accommodation: giving those customers what they want in terms of size, presentation, consistency, quality and scheduling. An equally critical point is conveying to the customer the attributes of your product and/or the service associated with your company that makes purchasing your product, rather than that of the competition, and easy and logical decision.

Who or what is your competition? This question should have been answered early on when creating your business plan. The best starting point it to do a cost-of-production analysis in the business plan that will determine the wholesale and retail price points of your product. 

Certification programs: Any certification program that improves quality control or reduces operational risk is well worth your time. Additionally, certification programs are strong additions to your marketing communications. Some programs, for example, ISO-9000-type programs for agriculture, are quality-assurance, efficiency-improvement, and production-risk-reduction systems that are designed to continually improve all aspects of the business. Back to top.

 

Production

The term ‘aquaculture” is applied to the production systems for both fish and water-dwelling non-fish creatures. Currently, U.S. aquaculture production takes place mainly on land in ponds or in coastal waters under states’ jurisdictions. The largest single sector of the U.S. aquaculture industry has historically been catfish, followed by shellfish (including clams, crab, lobster, oysters, scallops and shrimp) and then trout and other stocking and food fish. Figures from the 2007 Census (NASS 2009) indicated sales of catfish at $455.4 million, and combined food (slaughter) and stocking sales of trout at $210.6 million. Sales of cultured shellfish totaled $293.9 million.

By 2012, catfish sales had dropped to $341 million, down 20 percent from the previous year, while the value of trout for food and stocking had fallen to $178.6 million, which was actually a 6 percent increase from 2011 (NASS 2013). In contrast, the value and landings of commercially caught shellfish increased from $2.1 to $2.7 billion and from 1.1 billion to 1.4 billion pounds, respectively, between 2007 and 2011 (NMFS 2012).

Recent production advances have enabled several commercial finfish and shellfish operations to locate offshore operations in more exposed, open-ocean sites, for example, in state waters off Hawaii and New Hampshire. Other advances have driven established and newly emerging recirculating-production systems to potentially take high-quality product from high-value species, not just to specialty markets, but to grocery distributors and retail restaurant chains. Non-fish species are allowing enterprising entrepreneurs to address specialty high-value markets. We will consider production systems and non-fish species in the following sections:

Offshore aquaculture. The practice of culturing aquatic species in offshore cages has been severely criticized in some circles, based on the potential for negative environmental impacts, but these impacts have not been sufficiently detrimental to prevent the industry from expanding in many areas of the globe.   Offshore cage culture is an on-going commercial enterprise in Australia, Canada, Chile, China, Croatia, Greece, Ireland, Italy, Japan, Malta, New Zealand, Norway, Russia, the Shetland Islands, Spain, Turkey and elsewhere. For more information on off-shore aquaculture, please continue to the AgMRC off-shore <insert link here> aquaculture page.

Closed-system and “semi-closed” systems. These are systems where the fish are kept in tanks or ponds or raceways (connected concrete tanks) where the contact with the surrounding environment is strictly limited. A good example of a “closed” system would be fish production within a building within water-recirculating tanks; a good example of a semi-closed system would be catfish or bass in an outdoor pond. Usually, the more “closed” the system, the more critical are the needs for water -quality and temperature control, system monitoring, etc.

In a recirculating-water tank systems there can be great control and monitoring of almost every production variable. For this reason, these systems can be stocked at extremely high population densities, production that provides a high potential return on the initial investment and operating cost. These systems require power and back-up power systems to move air or water or both air and water to facilitate the removal of toxins and maintain proper dissolved oxygen levels. The design of the system may allow “size grading” of the fish as they grow. This is important to keep larger fish from killing smaller fish. Fish of similar size can be reared together at higher production densities, again, contributing to overall system efficiency and profitability. Closed systems also have the greatest bio-safety food-security risk-management potential; they also have the highest operating costs. If it is a controlled system in a building, diseases are more easily and efficiently identified and dealt with, it is easier to segregate and keep from impacting the entire production operation. 

Fish species well suited to closed recirculating systems include: tilapia, hybrid striped bass, barramundi (“Australian sea bass”), yellow perch, sturgeon and eel. Other species including walleyes, trout, catfish, largemouth bass, koi/carp, shiners, bluegills and sunfish can be raised in these systems, but may be more efficiently and economically produced in outdoor pond systems. For more information on fish well suited to closed recirculating systems, continue to the AgMRC fin-fish <insert link here> aquaculture page.

In pond systems, greater exposure to the atmosphere and perhaps more constant water change help to buffer upsets to the system; however, greater exposure to the environment also creates greater exposure to disease organisms, hinders optimal growth, production, and population densities. Pond systems can be profitable in that they focus on species that are well suited to ponds. These species produce harvestable product and may provide high potential return on initial investment, due to relatively low operating costs. The most simple pond systems may not use any type of filtration or need any energy inputs. Most have some aeration and use automatic feeders. Large commercial operations tend to be located in areas of the country where temperatures allow year-round or mostly year-round production.

Fish species well suited to outdoor pond systems include: tilapia, yellow perch, walleyes, trout, catfish, largemouth bass, koi/carp, shiners, bluegills and sunfish. Various “non-fish” species, turtles, alligator, and shrimp for example, also are well suited to pond-system production. Other species including hybrid striped bass can be raised in these systems, but may be more efficiently and economically raised in an indoor recirculating system. For more information on fish well suited to outdoor pond systems, continue to the AgMRC fin-fish <insert link here> aquaculture page. For more information on non-fish pond-suitable organisms, please continue to the AgMRC non-fish <insert link here> aquaculture page. Back to top.

 

Management

Labor needed for the enterprise? Like any livestock operation, aquaculture systems need human monitoring and attention. Personnel demands increase with the size and/or complexity of the operation. For example, a simple pond system may do well with a regular attention from the owners. A complex recirculating system will require regular checks, data recording and system maintenance. Most commercial ventures have full-time and part-time employees trained in production and post-harvest handling; as well as emergency procedures.

Labor and inputs required? Pond systems will require enough land for the ponds, support and storage buildings. Recirculating systems can be housed in new purpose-built construction, re-purposed storefronts, warehouses or farm buildings.

There are various licensing and inspection protocols that vary from state to state. While many states have made some effort to streamline the licensing process in order to foster or support local aquaculture industries, many others have stifled industry growth through a proliferation of permit requirements from various state and local agencies. Usually, your state Department of Natural Resources or Wildlife and the Department of Agriculture should be contacted as soon as possible to determine what permits are needed for your operation (in addition, local zoning, health and other regulations may also apply). For example, the following laws and regulations are taken from those required for producers from one Midwestern state:

  • Aquaculture unit license: Needed to operate a hatchery, to engage in the business of propagating fish in private waters or to hold fish for commercial purposes. The state conservation officer in your area must approve the application before a license can be issued. The licensee is allowed to possess, propagate, buy, sell, deal in and transport fish produced from breeding stock lawfully acquired.
  • Operators must secure breeding stock from licensed private fish hatcheries in the state or from lawful sources outside the state.
  • When purchasing fish, keep the bill of sale that allows possession to spawn, rear and harvest fish. Additionally, anyone bringing fish or fish eggs into the state that are not native must submit an application to the DNR and receive a permit prior to transporting the fish into the state. The DNR may require certification that the source of fish or fish eggs is disease-free.
  • Bait dealer's license: required if minnows, frogs, or clams are sold for fish bait. The license also allows the licensee to obtain bait from lakes and streams where permitted.
  • NPDES permit: This permit, from the National Pollutant Discharge Elimination System (NPDES), is needed for discharge of “used” water. Generally, only relatively large operations or flow-through hatcheries will need an NPDES permit.
  • Water withdrawal permit: This permit is required if withdrawal from a groundwater or surface water source is in excess of 25,000 gallons per day.
  • Water storage permit: The permit is needed if natural runoff is captured and stored (e.g., a dam across a waterway) and the permanent storage is in excess of 18 acre feet.
  • Well construction permit: This permit is required prior to construction of new water wells.
  • Floodplain development permit: This permit may be needed if a fish farm is constructed on the flood plain of a stream or if a dam is constructed across a waterway or stream.
  • Processing plant permit to operate a packing plant or slaughterhouse where fish are killed or dressed for food. Back to top.

 

Sources

Iowa State University Extension & Outreach Recirculating Aquaculture Publications

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